How Money Works

Flatman speak

2008-10-19T11:27:00.000-07:00

"I have a friend who regularly reminds me that if you jump off the top of an 80-story building, for 79 stories you can actually think you’re flying. It’s the sudden stop at the end that always gets you.

When I think of the financial-services boom, bubble and bust that America has just gone through, I often think about that image. We thought we were flying. Well, we just met the sudden stop at the end. The laws of gravity, it turns out, still apply. "

Thomas Friedman

One of life's greatest pleasures

2008-09-03T11:20:00.000-07:00

The basic criteria on which we judge a teacher's capability are
a) How strong his/her concepts are
b) How well is s/he able to put these across

Most teachers are bad to mediocre. Some are good at talking, but don't know shit. Some know their subjects very well, but are very bad at communicating things across. These teachers are still ok, because by asking questions well, you can get what you want and thus understand the topic.

Still, you really yearn for those rare teachers who fall in the good to excellent category. Their concepts are so strong that even the most complex or confusing questions does not create a wrinkle on their foreheads. They are able to put things across so well - that one clincher of a sentence that makes you 'funda-clicked'. And they are eager to answer your questions. They encourage tough questions, questions from outside the domain, any sort of a question as long as it is not stupid. They are the guys who encourage informality in discussion, who don't lay stress on solving stupid repetitive assignments, who instead encourage concept building and out-of-syllabus doubts, who care two hoots about procedures etc, and who will keep urging you to ask more questions. This stems from the love for the subject and the confidence they have in being able to answer any question you throw at them.

We have a subject this tri-sem on Maths, which covers concepts such as time value of money and all the applications of mathematics that we will be using in economics and finance. And we have been very fortunate to have a certain Mr. Vajpayee who is a wonderful teacher. Instead of just teaching the maths aspect of the subject, he spends time in every lecture on topics in economics and finance.. exchange rates, bank policies, carry trade, f&o, the breaking of the BoE, etc.. and I've had a ball listening to him.

Hope we get more teachers like him...

Just a filler

2008-08-24T12:17:00.000-07:00

My amateur attempts with MS Visio. As part of a poor effort to write a whitepaper on gold. Notice the professionalism at the bottom right ?

General Sectoral Info

2008-05-28T08:20:00.000-07:00

I always want to know 'atleast a little bit' about any part of the economy. I like to be aware of the basic working of any sector, and also make it point to keep myself abreast of the general happenings in all the sectors. A little bit beyond the tip of the iceberg in fundamental analysis.

Equitymaster has some good dummies'-guides for the prominent sectors. Worth a read. The individual terms they used can be researched separately. But equitymaster gives you a good birds eyeview on the sector, using which go about making yourself an authority on that sector.

Having just speed-read through 'The Ranbaxy Story', I am curious to understand the mechanics of the pharma sector. Oil is another sector whose working I would like to understand in depth. Upstream, downstream operations.. E&P... exciting words these !

The Dollar

2008-05-15T13:44:00.000-07:00

I have started reading 'The Biography of the Dollar'. (The author has also created a website specially for the book - http://www.biographyofthedollar.com/)

From what I can make out, the book does not seem to be a biography of the dollar. Rather, it is a well-written collection of tidbits about the dollar - currency trading in the dollar, manufacture of the dollar notes, how the dollar was introduced, etc. Of course, a lot of new ideas are mentioned in the passing, and if one is enthuasiastic enough to follow up all the concepts which are new, it would be really great.

I was also pondering over the idea thrown by Ming in the article I have listed in the previous post. In his article, he argues that since the Fed, (or any other central bank), is the only issuer/provider of money, and whatever money that is lent (either to the commercial banks, through the Fed Banks, or to the Government) is lent at an interest, it is not possible to pay back everything to the Fed ! With sufficient time, he say, the Fed will come to own more and more assets, held as securities against loans. Now, he just has an amateurish interest in economics, and obviously there is some reason why the banking system works the way it does. I am planning to read up more on this issue. A basic explanation can be found here.

Where does "money" come from ?

2008-05-12T13:00:00.000-07:00

I wanted the blogspot domain name "howmoneyworks", but was told by blogger that it had already been taken. (I tried how-money-works too, but that too was taken. I had to settle for the current one, with the silly 2 dashes between the words.) So, I thought of checking that blog. However, on googling for it, I got a different set of results. Among them, was this article.

( http://ming.tv/flemming2.php/__show_article/_a000010-000573.htm )

Definitely worth a read.

The Mandatory First Post

2008-05-12T12:41:00.002-07:00

The mandatory first line.

I do not aim to write my own articles / posts in this blog. Rather, I want to mention all the good articles / books that I have come across and gone through in my quest to understand the mechanism of money. This quest sounds very vague and all-encompassing, but that's what I want to know. So... here goes..